Moody’s Upgrades Ghana’s Local Currency

Ghana’s local currency has for the second time this year seen an upgrade by international rating agencies.

In March, Fitch ratings upgraded Ghana’s Long-Term (LT) Local-Currency (LC) Issuer Default Rating (IDR) to ‘CCC’ from Restricted Default (RD).

The recent upgrade came from Moody Investors Service on June 9, 2023.

It announced the upgrade of the country’s local currency long-term issuer rating to Caa3 from Ca where it was pegged in December 2022 citing the Domestic Debt Exchange Programme (DDEP) of the government which it said would cost creditors their investments.

“Moody’s Investors Service (Moody’s) has today upgraded the Government of Ghana’s local currency long-term issuer rating to Caa3 from Ca and maintained the stable outlook.”

In its publication, it attributed the upgrade to the completion of the government’s main local currency debt restructuring, stating that Moody’s assessment of future expected losses on local currency debt has diminished.

“Through this exchange, Ghana has achieved a degree of fiscal relief and is therefore unlikely for Ghana to seek and obtain another similar-scale debt restructuring in the short to medium term from the same creditors given the damage it would cause to its financial sector. Moreover, official sector support has started, with the IMF’s first disbursement under its programme with the country.”

The current rating- Caa3- captures elevated redefault risk, which remains tangible until Ghana’s local currency debt that has not been restructured is settled and until the foreign currency debt is restructured, it pointed out.

For the stable outlook, Moody’s said balanced downside and upside risks were accountable for it.

“To the downside, a protracted period of negotiations over the restructuring of the government’s foreign currency debt under the G20 Common Framework could prove lengthy, increasing the need to secure debt relief elsewhere, including from another local currency debt restructuring, especially if in the interim the government has mainly relied on domestic sources of borrowings. An extended loss of domestic market access could also result in default with significant losses for domestic creditors.

On the other hand, the restructuring of Ghana’s foreign currency debt could go relatively smoothly. Meanwhile, the official sector appears so far willing to provide swift support as shown by the IMF’s first disbursement,” it explained.

Also, Moody’s has upgraded the local currency senior unsecured MTN programme rating to (P)Caa3 from (P)Ca.